Although markets were strong throughout much of 2018, horrendous performance in December ended up dragging U.S. stocks into the red overall for the year. Indeed, the S&P 500 ultimately lost 4.4% for the year, marking its most significant single-year loss since the financial crisis of 2008. There were a handful of industries and individual names which thrived, even in spite of the general market tumult. However, most names fell in general, ending the year with disappointment.
Given the above, it's unsurprising that many exchange-traded funds tracking indices made up largely of U.S. securities also failed to perform well for 2018. We've taken a separate look at sector-specific funds to see which ETFs managed to earn top marks for the year. Overall, though, the situation was fairly grim: most ETFs posted overall losses last year, even as a small number of them were able to post gains or break even.
Below, we'll take a look at those ETFs which were among the worst performers in 2018. Many of the worst-performing funds are leveraged or inverse ETFs linked to natural gas, crude oil and other industries that were hit hard last year. These funds may have been poorly managed, generally unable to keep up as the market declined dramatically in the last few weeks of the year, or perhaps just unfortunately unlucky. In each case, we'll compare them against the S&P 500 as a benchmark.
1. ProShares Short VIX Short-Term Futures ETF (SVXY)
Performance in 2018: -91.75% (SVXY) vs. -4.4% (benchmark)
2. Direxion Daily Natural Gas Related Bull 3X Shares (GASL)
Performance in 2018: -79.80% (GASL) vs. -4.4% (benchmark)
3. VelocityShares 3X Inverse Natural Gas ETN (DGAZ)
Performance in 2018: -78.49% (DGAZ) vs. -4.4% (benchmark)
4. Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 3X Shares (GUSH)
Performance in 2018: -74.28% (GUSH) vs. -4.4% (benchmark)
5. Direxion Daily Homebuilders & Supplies Bull 3X Shares (NAIL)
Performance in 2018: -73.96% (NAIL) vs. -4.4% (benchmark
ProShares Short VIX Short-Term Futures ETF
The ProShares Short VIX Short-Term Futures ETF (SVXY) was the worst overall performer among ETFs in 2018. This fund offers inverse exposure to an index of VIX future positions. The weighted average maturity of the futures is 1 month. SVXY reaches this goal by providing daily -0.5x exposure to the S&P 500 VIX Short-Term Futures Index as a substitute for tracking the VIX index itself, which is not possible. Although SVXY declined by nearly 92% overall for 2018, few if any investors were likely to have suffered those losses. This product is designed for short-term use as a tactical trading tool, meaning that most investors will hold SVXY for a very short time.
SVXY was launched in October of 2011 and carries a high expense ratio of 1.38%. The fund has $378.3 million in assets under management.
Direxion Daily Natural Gas Related Bull 3X Shares
With losses of nearly 80% overall for 2018, the Direxion Daily Natural Gas Related Bull 3X Shares ETF (GASL) earns the second place on our list of worst performers for the year. This fund offers 3x daily exposure to an index of natural gas-related companies weighted equally. The index in question is the ISE-Revere Natural Gas Index. Like other leveraged products, GASL is not designed to be held over the long term, as it tends to miss its target performance when held for longer than its daily reset interval.
GASL was launched in July of 2010. It has an expense ratio of 1.06% and currently has an asset base of $37.54 million.
VelocityShares 3X Inverse Natural Gas ETN
The third worst-performing ETF of 2018 was also focused on natural gas. The VelocityShares 3X Inverse Natural Gas ETN (DGAZ) provides daily -3x exposure to the S&P GSCI Natural Gas Excess Return Index. Like GASL, it aims to provide those returns for single-day periods only. Thus, it's unlikely that investors would have held on to DGAZ for the full year. If they did, however, they would have seen losses of about 78.5% for that period.
DGAZ was launched in February of 2012 and carries a significant expense ratio of 1.65%. It has about $281.67 million in assets under management.
Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 3X Shares
The Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 3X Shares ETF (GUSH) fell by nearly 74.3% overall last year. This fund offers 3x leveraged daily exposure to the S&P Oil & Gas Exploration & Production Select Industry Index. GUSH weighs its index equally to avoid concentration in a small number of significantly-sized companies.
GUSH was launched in May of 2015 and carries an expense ratio of 1.15%. The fund has $259.91 in assets under management as of this writing.
Direxion Daily Homebuilders & Supplies Bull 3X Shares
A third ETF by Direxion rounds out our list of worst performers for 2018. The issuer's Daily Homebuilders & Supplies Bull 3X Shares fund (NAIL) posted losses of just under 74%. Like the other Direxion funds on this list, NAIL offers 3x leveraged exposure to its underlying index—in this case, the Dow Jones U.S. Select Home Construction index.
NAIL was launched in August of 2015 and carries an expense ratio of 1.12%. It has about $30.38 million in its asset base.